Executive summary
Illicit trade in counterfeit goods is a serious threat that continues to grow in scope and magnitude, with multiple impacts on consumers, rights holders and governments. For consumers, counterfeiting poses health and safety risks. It also lowers consumer satisfaction when low-quality fakes are unwittingly purchased. For legitimate intellectual property rights (IPR) holders, counterfeiting means lost sales, lower profits, reduced innovation incentives and longer-term brand erosion. For governments, counterfeiting leads to lower tax revenues and higher unemployment. Governments also face additional expenses in addressing public safety concerns and dealing with anti-counterfeiting legislation.
Korea is one of the most innovative economies in the world. Its innovative ecosystem has been made possible due to significant government support and private investment activities in research and development. The Korean economy is also well-integrated in global value chains, which boosts Korean productivity and competitiveness. However, this high level of innovation and globalisation makes the Korean economy vulnerable as intellectual property (IP) embodied in Korean products has been subject to counterfeiting and theft.
This report examines how trade in counterfeit and pirated goods affects the Korean economy. More specifically, it evaluates the magnitude and impact of global trade in counterfeit goods that infringe the IPR of Korean rights holders. The analysis identifies product categories that are targeted, the main economies of origin of counterfeit goods, and the main trade routes and transit points used. It also assesses the losses due to counterfeiting in terms of forgone sales and profit losses, taxes forgone by the Korean government, and jobs lost in Korea.
The impact of the COVID-19 pandemic on the trade in fake goods infringing Korean companies' IPR is also assessed in this report. It is found that although the pandemic exacerbated existing trends, its impact seems to have been moderate when absolute volumes of counterfeit goods are considered. The key effect of the pandemic has been the proliferation of e-commerce, which has amplified the availability and purchase of counterfeit goods online, demonstrating a discernible shift in consumer behaviour and sales channels.
The total value of world trade in fake goods that infringed Korean IP amounted to USD 9.7 billion in 2021, equivalent to 1.5% of all Korean exports.
Among goods infringing Korean IPRs, those deriving from information and communication technology (ICT) are the most targeted. Other Korean products commonly faked include fashion items, automotive spare parts, toys and games, and cosmetics.
Counterfeit and pirated goods that infringe the IPR of Korean rights holders come mainly from Hong Kong (China) and The People’s Republic of China.
Korean products enjoy a high reputation amongst consumers. About 41% of fake goods that infringe Korean IP are sold to consumers unaware they are buying counterfeit goods. This share varies among product categories, ranging from 91.8% for toys and games to 26.2% for electrical appliances.
In 2021, the total lost sales of Korean IPR holders due to trade in counterfeit goods amounted to more than USD 6.1 billion. In relative terms, the watches and jewellery sector experienced the highest losses (22% of sector’s sales), followed by the electrical appliances (ICT) sector (13.4% of sector’s sales).
In 2021, job losses due to trade in counterfeit goods totalled more than 13 000, with the highest number of losses in the electrical appliances (ICT) sector.
Lower sales due to counterfeiting result in lower revenues for the Korean Government from corporate income tax, personal income tax and social security contributions. Altogether, trade in counterfeit and pirated goods contributed to a reduction of Korean public revenues estimated at USD 1.5 billion in 2021.
This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Member countries of the OECD.
This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
Note by the Republic of Türkiye
The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Türkiye recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Türkiye shall preserve its position concerning the “Cyprus issue”.
Note by all the European Union Member States of the OECD and the European Union
The Republic of Cyprus is recognised by all members of the United Nations with the exception of Türkiye. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.
Photo credits: Cover @ Designed by OECD.
Corrigenda to OECD publications may be found on line at: www.oecd.org/about/publishing/corrigenda.htm.
© OECD 2024
Attribution 4.0 International (CC BY 4.0)
This work is made available under the Creative Commons Attribution 4.0 International licence. By using this work, you accept to be bound by the terms of this licence (https://creativecommons.org/licenses/by/4.0/).
Attribution – you must cite the work.
Translations – you must cite the original work, identify changes to the original and add the following text: In the event of any discrepancy between the original work and the translation, only the text of original work should be considered valid.
Adaptations – you must cite the original work and add the following text: This is an adaptation of an original work by the OECD. The opinions expressed and arguments employed in this adaptation should not be reported as representing the official views of the OECD or of its Member countries.
Third-party material – the licence does not apply to third-party material in the work. If using such material, you are responsible for obtaining permission from the third party and for any claims of infringement.
You must not use the OECD logo, visual identity or cover image without express permission or suggest the OECD endorses your use of the work.
Any dispute arising under this licence shall be settled by arbitration in accordance with the Permanent Court of Arbitration (PCA) Arbitration Rules 2012. The seat of arbitration shall be Paris (France). The number of arbitrators shall be one.